For Kia Motors Corp. Mexico’s historic car boom isn’t working out as planned.
A dispute with a recently elected state leader may prevent the start of production next month at a northern Mexico car factory representing more than $1 billion in investment, Kia said on Tuesday. The plant is in the cross hairs of Nuevo Leon Governor Jaime Rodriguez, a former rancher who threw out the ruling party in a landslide last year and says he opposes the deal Kia signed with his predecessor.
The factory already lags five months behind schedule and South Korean President Park Geun Hye appealed to her Mexican counterpart, Enrique Pena Nieto, to intervene in the conflict during a state visit to Mexico City this week. The tiff is a rare snarl for Mexico’s success at using cheaper labour and trade deals to win billions of dollars in foreign investment from the likes of Nissan Motor Co. and Ford Motor Co., which announced plans on Tuesday to build a $1.6 billion small-car plant in the state of San Luis Potosi.
At issue are the tax benefits and infrastructure investment the former governor used to lure Kia to Nuevo Leon. Rodriguez became Mexico’s first state governor elected as an independent last year after electrifying voters with his plainspoken criticism of the political establishment. Known as “El Bronco” — the nickname can refer to a wild horse and also be roughly translated as “the brazen one” — he reiterated his opposition to the existing pact with Kia this week while saying an agreement may be near.
“Our government is totally open but we can’t offer 20 years of payroll-tax exemptions,” he said in a statement late Monday.